So you’re thinking of selling your first home and buying your second. Where on earth do you start?
Last week I hit up folks on a few of the Facebook Community Pages to gain some insight into what has been going wrong recently for sellers and buyers. A lack of information and confusion around the sale of a first home came up multiple times in the PM’s I received.
This post comes too late for the people who responded to my questions but may help those like them.
Doing Your Numbers.
How much is your home worth?
I suggest that you do a bit of your own research online and then get a few real estate agents in to appraise.
Other options are getting a Registered Valuation or using an E-Valuer. Bear in mind that E-Valuers can be hit and miss as there are a number of things they just don’t take into account.
For more on figuring out what your home is worth read:
What will your next home cost?
Where are you headed?
Most homes are marketed without a price and even when they are marketed with a price, buyers can still find establishing what they are actually going to have to pay pretty tricky.
A short cut to visiting 200 Open Homes before making your first offer is asking one of your friendly real estate agents to provide you with statistics for the suburb (or suburbs) you are considering. Ask them to filter by street for your easy reference. Google the addresses and you will, most likely, find cached links to advertising. Going through this process is a quick way to help you focus your search and avoid missing out on early opportunities due to the hesitation to act that accompanies uncertainty around values.
Don’t know who to ask for statistics? Ask me here.
Other costs associated with selling & buying.
Because there are a lot of variables I’m not going to attempt to actually quantify these costs for you but will give you some direction by pointing out the things you will want to consider and explore with the professionals you are thinking about working with.
Whether you decide to use an agent or not is a personal decision. There are plenty of good reasons to use a skilled agent and going it alone, or making price your primary criteria with agent selection, can cost you considerably more than you save.
Don’t pick your agent on price. Pick them on ability.
I’ve written a post here taking a candid look at points of difference agents you speak with will talk about. It’s a long post but just skip down to the bits relevant to you. I think you will find it helpful.
For more information on private selling vs using an agent check out this post.
Marketing. Beyond the basics.
Most agencies offer some complimentary basic marketing free of charge. Because the traditional real estate model operates on no sale/no fee the seller typically pays for marketing enhancements beyond those basics.
Make sure you ask the agents you are interviewing what basic marketing they cover and what they recommend you invest in beyond that in order to achieve the best result.
LIM Reports, Property Files, Builders Report, Methamphetamine Tests and Registered Valuations. While getting any of the above when purchasing may be optional, if you have a low deposit or are buying privately you are highly likely to need to get a Registered Valuation as a condition of your finance. And your bank may also require a Builders Report if you are buying a home with monolithic (plaster) cladding which was built in the weather tightness risk window (1980s to mid-2000s).
Some conveyancers offer a fixed rate and
Is your mortgage fixed? You will want to check with your broker or bank about potential break fees.
Think truck, movers, insurance in transit, cleaning costs and reconnection of services (where applicable).
Important Note: I suggest you research these costs in your area and do your numbers in the middle. As with most things, you tend to get what you pay for so banking on doing things in the cheapest possible way can turn out to be more expensive in the long run – whether in relation to the building inspection service you engage to advise you about structural issues, the agent or solicitor you engage to represent you or the marketing you choose to ‘skip’ because “surely the house will sell itself”. I am not suggesting that cost always equals value just gently reminding you to beware of expensive
The Chicken or The Egg? Timing Your Move.
Knowing what way around to conduct your sale can be confusing. Even more so because you will usually be relying on advice from someone you don’t have a history with and who has a vested interest in you selling using their services.
Hopefully, this post will help you get to grips with a few fundamentals and help you make decisions that will suit your situation.
Before I begin I will say that eliminating stress entirely is near impossible so you will, to a degree, need to pick your poison and focus on minimising stress and uncertainty rather than eliminating it altogether.
Buy First: Subject To House Sale
Often sellers tell me that this is their preferred option. The reason being is that it feels ‘safe’. You find something you like, make an offer conditional on selling your property and bombs away.
Pros of this approach
You aren’t letting go of your home until you have found another one.
What Can Go Wrong
Less negotiating power. Sellers are usually not especially keen on offers subject to house sale because of the uncertainty that comes with them. If you have any kind of competition from cash buyers* you may be out of the running, unless your offer is considerably higher to compensate for the unknowns.
Cash-out clauses. If you get lucky and have an offer accepted subject to house sale there is a 99% chance of the seller insisting on a cash-out clause. In layman’s terms, a cash-out clause means that if another buyer puts an offer forward you will be given a short period of time (usually three to five working days) to declare your agreement unconditional or your agreement will cancel and the other buyer gets the house.
Obviously, if another buyer tries to cash you out and you haven’t sold your house, this will be a problem for you.
Can you insist on no cash-out clause? You can try but I would be surprised if a seller took your offer, even in a buyers market. Any professionals dealing with a seller would not be doing their job if they did not point out the risk to them.
What are the odds of being cashed out? Reasonably high. If you liked the property enough to offer on it chances are so will someone else.
*Cash Buyer: A buyer not buying subject to house sale.
A work around…
Organise bridging finance ahead of time just in case you need it.
Watch out for this.
Be aware that real drama can occur when bridging finance is not available and the home you are selling is already under contract. This leaves you in the position of being unable to withdraw from selling your home, getting
At first glance, you might be nervous about this option. What if you sell and haven’t found anything you like? What if you have to move twice?
The above concerns are warranted but can be mitigated by negotiating a long settlement with your buyer giving you ample time to house hunt or organise somewhere else to go (ie. family or a short term rental) should a long settlement not eventuate.
When selling your first home many of your ideal buyers will be first home buyers. Because these people are renting or staying with family they are often quite flexible with settlements.
Pros of this approach
- Certainty about how much you have to spend.
- More control over settlement you are working to.
- Buying after selling makes you a cash buyer giving you considerably more negotiating power.
- Provided you obtain a large enough deposit you should be able to use your deposit as a deposit (or partial deposit) on your next home.
What Can Go Wrong
- If you don’t secure a long enough settlement or a settlement that matches yours you will need to move twice.
Buy First: Unconditionally
We see this when people buy at Auction prior to selling their home.
You would only want to consider this if the home you are selling is very straight forward (ie. no non-compliant works, building issues or Title defects), there is a strong market for it, you have checked out median days to sell, and your price expectation is in line with current statistics. And you have bridging finance approved.
This is a very risky option unless you can afford to own two houses – at least in the short term.
A note on choosing your team…
Having the right people on your team is going to make the world of difference to your real estate journey. Who do you need?
Real Estate Agent
Attitude, experience, responsiveness and communication skills are key attributes to look for when choosing your team.
Aspects of a house sale are very time sensitive so I can’t stress the importance of responsiveness enough. A professional who takes half a day to respond to an urgent phone call may cost you your sale. And experience and communication skills really come to fore when something goes wrong – both in troubleshooting solutions and saving your sanity by ensuring you and other members of your team are kept up to speed with developments.
And finally, don’t be scared to ask for a detailed list of exactly what comes with a service you are engaging and for delivery timeframes.
I hope this has been helpful. And if there is something I haven’t covered off please tell me about it in the comments or email me here.
Good luck with your sale!
More articles for sellers.
Why Market Without A Price? Strategy For Sellers.
Is Auction The Best Strategy? Three Times It Just Isn’t.
Is The First Offer Usually The Best Offer? Assessing Early Offers.
Smart Ways To Deal With Stupid Offers.
Unlucky In Love? Love, Red Flags and Real Estate.
Are you looking to sell property in the greater Auckland region? Like some advice about your property or plans?
Feel free to give Maria a call on 021 454694. Or email her here.
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